Banking 101: What a Patriot Bond Is and What to Do With It

Note: This article is part of our Basic Banking series, designed to provide new savers with the key skills to save smarter.

Savings bonds are low-risk investments backed by the U.S. government. After you purchase the bond, you’ll get back the principal, plus interest.

Several types of savings bonds exist, and not all earn interest the same way. For example, Patriot Bonds, which are classified as Series EE bonds, are guaranteed to double in value after 20 years, provided they were purchased in June 2003 or later. Ken Tumin, founder of DepositAccounts, said that’s an annual rate of return of about 3.5% — not too shabby considering that the current 30-year treasury yield was just over 2.2% in November 2019.

But what are Patriot Bonds, exactly? Here’s everything you need to know, from how to cash a Patriot Bond to whether it’s possible to get your money early.

What’s a Patriot Bond?

Patriot Bonds were created in response to the 9/11 attacks as a way to raise money for anti-terrorism efforts. The bonds were issued from December 2001 to December 2011 and then discontinued.

Patriot bonds function identically to paper Series EE bonds, although they’re distinguished by the words "Patriot Bond" printed at the top of the certificate. The bonds could be purchased in amounts ranging from $25 up to $30,000.

Interest rates for those bonds will depend on when you purchased them. Series EE bonds purchased between May 1997 and April 2005 earn interest at a variable rate; those purchased in May 2005 and after earn interest at a fixed interest rate.

How to cash a Patriot Bond

Although Patriot Bonds no longer are issued, many people haven’t cashed them in and are trying to determine the best time to do so.

All Series EE bonds, including Patriot Bonds, reach full maturity and stop earning interest after 30 years. That means you’ll want to cash your Patriot Bonds sometime between when you purchased them and when they reach full maturity.

Because Patriot Bonds are paper investments, you can redeem them at your local bank. (Series EE bonds now are available only in electronic form.) It’s a straightforward process, and you’ll get your money right away. Just make sure to bring proof of identity. If you redeem bonds for someone who passed away, you’ll have to bring a certified death certificate.

Nearly every bank should be able to complete the transaction, but if yours won’t, you can download or order an FS Form 1522 from the U.S. Department of the Treasury.

Can I cash a Patriot Bond early?

Technically speaking, you can redeem a Patriot Bond whenever you like, but timing matters when it comes to getting the most out of your investment.

Patriot Bonds purchased in June 2003 or after are guaranteed to double in value in 20 years, but those purchased before June 2003 will double in 17 years instead. That said, you’ll get an even better return if you hold out until they fully mature. This is because Series EE bonds earn interest for 30 years, so you’ll continue to gain value long after your Patriot Bonds double.

It also is worth looking at the interest rates for your specific bond — which, again, depends on when you purchased it — to determine whether it’s worthwhile to redeem it before the 30-year full maturity. However, you won’t want to wait any longer than 30 years to redeem your bond.

“At 30 years, it reaches its full maturity and stops earning interest, and if you haven’t paid any taxes, you actually owe taxes then, too,” Tumin said. “So, it makes very much sense to redeem them at 30 years and not wait any longer because there’s no extra value of waiting.”

Taxpayers aren’t required to report the interest earned on a Series EE bond until they redeem it or the bond matures, whichever comes first. The upside is that Series EE and Series I savings bonds (another type of federal bond) are taxed only federally, so you’re off the hook for state and local taxes. If you meet specific education requirements, you might be able to reduce your tax burden even more.

Taxes aside, Series EE bonds and Series I bonds can’t be redeemed within the first 12 months of issuance, and there’s a penalty for cashing them in prior to the five-year mark. However, both are moot if you haven’t redeemed your Patriot Bonds, because the youngest Patriot Bond is 8 years old by now.

How do I redeem my bond, and can I take it all?

Again, the easiest and fastest way to redeem a Patriot Bond is at your local financial institution. But you can convert paper Patriot Bonds to electronic bonds and cash them in at your convenience. These funds can be deposited into a specified checking or savings account.

Going the electronic route also means you can redeem as much or as little as you like, as long as it exceeds $25 and you leave a minimum of $25 in your account. Just keep in mind that if you take a partial redemption, you’ll be paid interest only on the amount you redeem.

I have a Series I savings bond. What about those?

Series I savings bonds aren’t guaranteed to double in value after 20 years, and they earn interest a little differently. Unlike many types of Series EE bonds — particularly those sold from May 1997 to April 2005, which have a variable interest rate — all Series I bonds have a fixed interest rate and an inflation rate.

“When you purchase an I bond, the fixed rate will remain the same throughout the life of the bond until you redeem it or until it matures,” Tumin said. “The inflation rate will change every six months. The Treasury announces new inflation rates every May 1 and Nov. 1.”

Still, when it comes to redeeming them, Series I bonds aren’t that different from Series EE bonds. Most financial institutions can process paper bonds, and you can mail them in. Electronic Series I bonds also can be redeemed directly through TreasuryDirect.

However, as with Series EE bonds, you can’t cash in Series I bonds within 12 months of issuance. In addition, if you redeem them before five years pass, the final three months of interest will be withheld. That’s because savings bonds are designed to be long-term investments — the penalty is meant to deter people from redeeming them early.

Find out how much your Patriot Bond is worth

If you converted your Patriot Bond to an electronic bond, the current value should be available in your account. You also can use this TreasuryDirect online calculator to determine how much your paper savings bond is worth.

After you determine the value of your Patriot Bond, take a look at your overall investment portfolio to decide the best time to redeem it.

How much is a $50 Patriot Bond worth?

The value of your bond obviously depends on when you purchased it, but here are a few examples. A $50 Patriot Bond purchased in December 2001 would have cost $25, because those bonds were sold for half their noted value originally, and it would be worth $51.12 as of November 2019. That’s slightly more than double your original investment.

Meanwhile, a $50 Patriot Bond purchased in June 2005 — after the new interest-rate system for Series EE bonds began — would be worth $41.20 as of November 2019.

How much is a $100 Patriot Bond worth?

Again, a $100 Patriot Bond would have cost $50 in December 2001, and, as of November 2019, it would be worth $102.24.

To give a different example, say you purchased a $100 Patriot Bond on the later end of its availability, in November 2009. That bond would be worth only $56.40 in November 2019, because it wouldn’t reach full maturity until November 2039.

Ultimately, a lot of factors determine the best time to redeem your Patriot Bonds, including when you purchased the bond, when its value will doubles and, of course, your financial situation. After you know how much your bond is worth — and how to redeem it — you can make the best decision for yourself.

As the national debt grows I'm not sure I would trust that "guaranteed to double in value" promise from the government.......Just wait & they will change the rules......all the while explaining to us why it's such a good thing.......who knows what will happen in 20 years......No.

The gov't doesn't have to change the rules since they own the printing press, though if they continue to use the press too much then inflation will be the thing that eats away at the doubled [numeric] value.

Is it just me or does this article seem unclear and confusing? It says guaranteed to double in 20 years but pays interest for 30? How exactly does this work? You have to redeem them after 30 years instead of it automatically maturing? Is a series I similar to a TIP? Not a helpful article IMO

Re #2, in general I think the article is nicely written and it's good to have a discussion about savings bonds every once in a while.

But, I do agree with you on that point in the article, where it says "but you’ll get an even better return if you can hold out 10 more years," the article is very confusing there. Yes, a EE bond will double in value (at 17 or 20 years) and thereafter continue to pay interest until 30 years. But the interest rate between year 20 and 30 depends on when the bond was issued, etc., and I think that rate has not even been set yet if the bond hasn't doubled in value yet. So, everyone should review the rate on their bonds after original maturity (= bond doubles in value) and decide if the interest rate is worth to continue to hold the bond.

If someone holds a bond to 30 years, the interest needs to be reported at that time. (Not cashing in the bond does not extend the time to report the tax.) So, there is a risk in holding a bond "too long" and forgetting to report tax in a timely manner.

What the writer was getting at with the holding out for 10 more years was this: the actual rate that existing EE Bonds were earning for a long time was way below the required averqge rate of 3.5% over the first 20 years, so a much more interest will be earned in the last 10 years while the bonds play catch-up to the 3.5%. Example: suppose you invested $10,000 in EE Bonds ten years ago, in January 2009. Because of very low interest rate environment over the last 10 years, those bonds today are worth only $11,376 (per the Treasury's online calculator), so the average annual interest rate over those 10 years was only 1.376%. For those bonds to earn an average of 3.5% over the first 20 years, for the next 10 years the bonds will need to earn interest of ($10,000 - 1,376 = ) $ 8,624 over the next 10 years, for an average annual rate of 8.624%! And. because rates right now are nowhere near that rate, unless and until the actual rate does reach 8.624% (which may never happen), the further you go down that last 10 year line the higher thec effecive interest rate will be. For people who invested in EE Bonds ten years ago, it makes no sense to not hold on tp the bonds until the first 20 years are up. After that it would depend on what the current rate the bond pays versus what the marketplace will then be offering.

#37, I'm not sure if that's what the article meant, because nowhere did it mention that it's talking about bonds issued 10 years ago. In the same sentence, it talked about bonds issued 18 years ago. But your point is well taken, yes, a 10 year old EE bond will have a much higher rate over the next 10 years than its stated interest rate!

EE bonds are purchased at half of their face value. In 20yrs they can be redeemed for face value. Thereafter they continue to earn interest for up to 10 yrs. Keep in mind that the accrued interest in paid biannually so if the bond is redeemed prior to the pay date you will forfeit the accrued interest. My 28 y/o EE bonds are still yielding 4% per year for the final two years left

Unfortunately, those EE bonds yielding 5-6% have long since quit paying any interest at all. All that I held were cashed in at the end of their 30 year cycle. Most of them were gifts to me as a child each birthday or for Christmas. Not large denominations by no means, but they all added up.

Now, I think this has been mentioned before ... there is some concern about TreasuryDirect that the Treasury won't make someone whole again if their TD account were to be compromised and emptied. This does not apply to paper bonds, these can be re-issued if lost or stolen. So, paper bonds may be safer than holding the bonds in TreasuryDirect.

#16 Is Each and every single T bill/note/bond has a unique number, (just like every US Currency Paper Note has a unique number). Therefore tracking each T bill/note/bond from its issuance to its maturity/redemption is under the control and audit of the US Treasury.

The bonds issued by Treasury Direct are not - repeat not - anything like bearer bonds. Actually "Tax Equity and Fiscal Responsibility Act of 1982" essentially put an end to issuance of any government bonds (even the Municipal Bonds) in the US that are bearer bonds.

Therefore once again - I will buy "EE" without an iota of worry/doubt/concern. That includes worry/doubt/concern of theft as well !!

You're not addressing the issue the poster raised. This issue has been widely discussed on bogleheads. Whether you are worried about it is your choice, but you need to directly address the issue being raised.

Steve, perhaps you can explain how a theft from Treasury Direct would work.

Because there is no market, they could only be transferred to another Treasury Direct account. Right? Is that possible? Because my recollection is transfers have to be made in writing. How does theft from Treasury Direct work, theoretically?

# 23 RJMhave you cashed these type of securities before? i did at at bank and 1 at a CU.the 40 EEs i did at the bank had to be processed one by one done by hand.i had to wait through several cups of coffee :)

Until some time ago most banks had a policy of cashing out Savings Bonds for (theor own!) customers, but not many do that anymore. You may want to ask your bank whether or not they will do so. Otherwise you will need to mail the bonds to the Treasury (you can find their address online), together with a form that needs to be completed and signed. You will need to allow up to 2 weeks to receive your redemption check.

"Taxpayers aren’t required to report the interest earned on a Series EE bond until they either redeem it or reach the 30-year mark — whichever comes first."

That's what they say, but the way it works in reality is you can just report the interest on the year in which you redeem the bond. Whether you redeem it through a local bank/CU or by mailing it to the Treasury, you will receive a 1099-INT for it with the current year's date, not the year you were supposed to redeem it if you hadn't forgotten about it. If you report the interest before redeeming it, you'll have a 1099 mismatch to have to explain later.

The tax rules do require that interest be reported no later than the date of redemption, but the owner can elect to report the interest annually. The default is to defer the tax until redemption, but after the election to report annually is made, that election becomes fixed and cannot be revoked in a later year.

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